Monthly Payments: You'll make monthly payments (lease payments) to the lessor (the entity you lease the car from) during the lease term. These payments cover the depreciation (loss in value) of the car during the lease period, interest, taxes, and any additional fees.
Down Payment: In some cases, you may need to make a down payment at the beginning of the lease, which can reduce your monthly payments. However, a down payment is not required for all leases.
Mileage Limit: Most leases come with a set mileage limit for the lease term. If you exceed this limit, you'll have to pay excess mileage charges.
Residual Value: The estimated value of the car at the end of the lease term is called the residual value. If you choose not to purchase the car at the end of the lease, the lessor uses this residual value to calculate any potential wear and tear charges.
Lease-End Options: At the end of the lease, you have several options:
- Purchase the car: If you wish to keep the car, you can purchase it from the lessor for the agreed-upon residual value, plus any additional fees.
- Return the car: You can return the car to the lessor according to the terms of the lease agreement.
- Lease a new car: You can lease a new car from the same or a different dealership, with a new lease contract and terms.
Pros of Car Leasing:
- Typically lower monthly payments compared to buying a car.
- No need to worry about selling or trading in a car.
- Tax advantages in certain regions.
- Access to newer vehicles with latest features.
Cons of Car Leasing:
- You don't own the car and cannot sell it during the lease term.
- Mileage restrictions can limit usage.
- Additional charges may apply for wear and tear beyond normal use.
- Early termination penalties if you end the lease before the agreed-upon term.
